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Report: States Finding Ways to Expand Social Programs Despite Setbacks

By Danielle Parnass, CQ Staff

July 10, 2008 -- Bush administration policies and a weak economy have hindered state initiatives to further expand Medicaid and the State Children's Health Insurance Program (SCHIP), analysts with Families USA said at a briefing Thursday.

Researchers noted a sharp change between 2007 and 2008. Many states last year sought to expand these programs but instead had to scale back their initiatives in 2008 and either make cuts or find other funds, said researchers, who said increased federal funding is necessary to help states provide needed coverage with these programs.

In addition, the possibility of a recession has negatively affected Medicaid such that many states are having trouble addressing budget shortfalls in fiscal 2008, said two new reports released by the group.

Still, states are finding creative ways to get around these roadblocks, said Jennifer Sullivan, Families USA senior health policy analyst. Four states—Indiana, Louisiana, Ohio, and Oklahoma—changed their proposed SCHIP eligibility expansion from 300 percent of poverty to 250 percent to meet an Aug. 17 directive issued by the White House that said states had to meet new standards to expand children's coverage.

New York and Wisconsin have been using state funding to expand their programs, while others also have been responding with expansion plans or funding to work around these set backs, the reports found.

Rhode Island and California, on the other hand, are considering cuts to children's programs due to budget deficits in fiscal 2008 and a lack of federal funding that would have come with the SCHIP reauthorization.

"It's an encouraging time" but things are "cautiously optimistic," Sullivan said. "States are in a wait-and-see mode."

Medicaid is closely linked to state economies, said health policy analyst Rebecca Bruno. Cuts to Medicaid can cause states to lose federal funding as well as business activity and lead to increased demand for its services from unemployment.

All these factors combine to make a "perfect storm" for states, Bruno said.

"The only way for states to weather this storm is for the federal government to step in and provide relief," she said.

States do have options to avoid these cuts, such as tapping into tobacco or rainy day funds, but these are only short-term options and won't boost the state's economy, Bruno said.

Experts are looking for future federal government initiatives to deal with these cuts. Rachel Klein, Families USA deputy director of health policy, said there is talk of a possibility of a second stimulus package in Congress this fall, which may include funding for Medicaid.

The next administration also will be crucial in dealing with SCHIP funding, set to expire in March. Democratic presidential candidate Sen. Barack Obama of Illinois has proposed expansion of Medicaid and SCHIP. Republican presidential candidate Sen. John McCain of Arizona has not explicitly addressed expansion of either program in his health care proposals.

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